"THE ACTION UKRAINE REPORT"
In-Depth Ukrainian News, Analysis, and Commentary

"The Art of Ukrainian History, Culture, Arts, Business, Religion,
Sports, Government, and Politics, in Ukraine and Around the World"

"UKRAINE'S FUTURE AND UNITED STATES INTERESTS"
Committee on International Relations
Subcommittee on Europe Hearing
Representative Doug Bereuter, (R) Nebraska, Chairman
Representative Robert Wexler, Florida, Ranking Democrat
U.S. House of Representatives, Washington, D.C.

"THE ACTION UKRAINE REPORT" Year 04, Number 78
Action Ukraine Coalition (AUC), Washington, D.C.
morganw@patriot.net, ArtUkraine.com@starpower.net
Washington, D.C.; Kyiv, Ukraine, THURSDAY, May 13, 2004

INDEX OF ARTICLES
"Major International News Headlines and Articles"

1. "UKRAINE'S FUTURE AND U.S. INTERESTS"
Subcommittee Hearing Notice
Committee on International Relations, Subcommittee on Europe
Doug Bereuter, (R) Nebraska, Chairman
Robert Wexler, Florida, Ranking Democrat
U.S. House Of Representatives
Washington, D.C., Wednesday, May 12, 2004

2. "UKRAINE'S FUTURE AND U.S. INTERESTS"
Testimony of Anders Åslund, Director, Russian and Eurasian Program
Carnegie Endowment for International Peace (CEIP)
Committee on International Relations, Subcommittee on Europe
U.S. House Of Representatives, Wash, D.C., Wed, May 12, 2004

3. "UKRAINE'S FUTURE AND U.S. INTERESTS"
Testimony of Nadia Diuk, Director, Europe & Eurasia Program
National Endowment for Democracy (NED)
Committee on International Relations, Subcommittee on Europe
U.S. House Of Representatives, Wash, D.C., Wed, May 12, 2004

4. "UKRAINE'S FUTURE AND U.S. INTERESTS"
Written Testimony of Michael Sawkiw, President
Ukrainian Congress Committee of America (UCCA)
Committee on International Relations, Subcommittee on Europe
U.S. House Of Representatives, Wash, D.C., Wed, May 12, 2004
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THE ACTION UKRAINE REPORT-04, No. 78 ARTICLE NUMBER ONE
Politics and Governance, Building a Strong, Democratic Ukraine
http://www.artukraine.com/buildukraine/index.htm
=========================================================
1. "UKRAINE'S FUTURE AND U.S. INTERESTS"
Committee on International Relations, Subcommittee on Europe
Subcommittee Hearing Notice

Committee on International Relations, Subcommittee on Europe
Doug Bereuter, (R) Nebraska, Chairman
Robert Wexler, Florida, Ranking Democrat
U.S. House Of Representatives, Washington, D.C.

DATE: Wednesday, May 12, 2004
TIME: 1:30 PM
SUBJECT: "Ukraine's Future and United States Interests"

WITNESSES: PANEL I
Mr. Steven Pifer, Deputy Assistant Secretary
Bureau of European and Eurasian Affairs
U.S. Department of State
[Pifer's testimony will be published tomorrow]

PANEL II
Anders Aslund, Ph.D., Director
Russian & Eurasian Program
Carnegie Endowment for International Peace
[Dr. Aslund's entire testimony is published below.]

Nadia Diuk, Ph.D., Director
Europe & Eurasia Program
National Endowment for Democracy
[Dr. Diuk's entire testimony is published below.]

WRITTEN
TESTIMONY: Michael Sawkiw, President
Ukrainian Congress Committee of America (UCCA)
[Mr. Sawkiw's entire testimony is published below]

Ihor Gawdiak, President
Ukrainian American Coordinating Council (UACC)
[Gawdiak's testimony will be published tomorow.]
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THE ACTION UKRAINE REPORT-04, No. 78: ARTICLE NUMBER TWO
The Genocidal Famine in Ukraine 1932-1933, HOLODOMOR
Genocide Gallery: http://www.artukraine.com/famineart/index.htm
==========================================================
2. "UKRAINE'S FUTURE AND UNITED STATES INTERESTS"

Testimony of Anders Åslund, Ph.D.
Director, Russian and Eurasian Program
Carnegie Endowment for International Peace (CEIP)
Committee on International Relations, Subcommittee on Europe
U.S. House Of Representatives, Wash, D.C., Wed, May 12, 2004

Mr. Chairman, I would like to thank you for this opportunity to speak on an
important topic. In my view, no political event in Europe this year is more
important than Ukraine's presidential elections next October. They amount to
two clear-cut choices between democracy and dictatorship as well as between
a Western and Eastern geopolitical orientation.

The United States is well liked and highly influential in Ukraine. The U.S.
can do a great deal to influence that country's choice. The main objectives
for U.S. policy on Ukraine should be to support democracy. If only democracy
is secured, Ukraine is most likely to choose a Western geopolitical
orientation.

As a matter of disclosure, I first visited Ukraine in 1985 and have kept in
close touch with the country ever since. I worked as an economic advisor to
the Ukrainian government from 1994 to 1997, and I have continued to follow
its economic and political development.

Recent Economic and Political Developments

To make sense of recent developments in Ukraine, it is probably most
illuminating to start with its economic metamorphosis. It is been
transformed from moribund to a highly dynamic economy which has undergone
swift structural developments since 2000. For the last four years, Ukraine
has enjoyed an average growth rate of 7.3 percent a year, and growth seems
to be accelerating. For the last year, three other economic indicators are
also telling. Industrial output surged by 16 percent, machinebuilding output
by as much as 36 percent and exports by a whopping 28 percent. The Ukrainian
economy is not only dynamic, but it is also rapidly becoming more
sophisticated and integrating into the world economy.

These recent economic developments stand in sharp contrast to the 1990s.
Until 1999, Ukraine underperformed even other post-Soviet economies, while
a handful of tycoons or oligarchs made fortunes on government subsidies and
regulations. In Soviet times, Ukraine's GDP per capita was slightly higher
than Russia's, but it has slipped to less than half of Russia's. Yet,
eventually, macroeconomic stabilization, liberalization and privatization
took hold, and a market economy was formed.

The real breakthrough occurred in 2000, when a new government under Prime
Minister Viktor Yushchenko carried out momentous market reforms, slashing
subsidies to oligarchs and leveling the playing field. Since then, Ukraine's
state budget has been close to balance and inflation under control. About
two-thirds of national income is produced by private enterprises. Yushchenko
's deputy Yuliya Tymoshenko minimized subsidies in energy. In revenge, the
oligarchs ousted both of them after slightly over a year. Even so, sound
market economic reforms have continued. From this year, a flat personal
income tax of 13 percent has been introduced.

The whole nature of Ukraine's business changed. Until 1999, Ukraine's
dominant businessmen were shady commodity traders, who made more money
on the government than on the market. Today, these traders have been
replaced by real companies. Ukraine's four largest enterprises are healthy
metallurgical corporations, namely System Capital Management and the
Industrial Union of Donbass in Donetsk, as well as Interpipe and Privat in
Dnepropetrovsk. Ukraine has comparative advantages in steel production, and
steel accounts for nearly 40 percent of Ukraine's exports. Light industry
and food processing have developed well for years, and trade has come of
age. Recently, machinebuilding has taken off. Ukraine also has an impressive
computer programming sector. Many sound corporations of all sizes are also
flourishing on a competitive market, although the bureaucracy is deeply
corrupt and the rule of law not very stringent.

My contention is that, with such a strong competitive market economy,
Ukraine needs to make very serious political mistakes to fail.

Unfortunately, that cannot be excluded. Whereas the economy is modernizing
at great speed, the political system is pretty retrograde.

To understand Ukraine's economy and politics, one must comprehend its
oligarchic groups, which remain the political and economic base of the
country. The three most important oligarchic groups are regional: the
Donetsk group, the Dnepropetrovsk group and the Surkis-Medvedchuk group
in Kiev. These groups are both economic and political. At present, the
strongest group by far is the Donetsk group. Its leader is Rinat Akhmetov, a
businessman who owns System Capital Management, Ukraine's biggest
corporation, focusing on metallurgy. Prime Minister Viktor Yanukovich and
the Deputy Prime Ministers for energy and finance also hail from the Donetsk
group. Its parliamentary faction, the Regions, has some 65 members out of a
total of 450.

The second most important group is the Dnepropetrovsk group, whose business
leader is Viktor Pinchuk, who owns the metallurgical company Interpipe. Its
party, Labor Ukraine, has about 40 parliamentarians and is led by the
Chairman of the National Bank, Serhiy Tyhypko. Pinchuk owns three TV
channels. The Kiev businessman Hryhoriy Surkis and President Kuchma's chief
of staff Viktor Medvedchuk form the third group, which is much more
state-oriented. Unlike the other groups, it has not developed normal private
enterprises as yet. Medvedchuk controls the three biggest TV channels, and
he plays a great role in law enforcement. Their United Social Democratic
Party comprises some 40 parliamentarians. President Leonid Kuchma rules by
playing off these and other less important oligarchic groups against one
another.

Ukraine is a country in swift development, and the transformation of the
oligarchic groups might be seen as one of the keys to development.
Privatization and the leveling of the playing field means that in both
Donetsk and Dnepropetrovsk enterprises have becoming more independent
from one another, and they have become competitors.

They are also facing competition from other groups, which are independent
or support opposition parties. Therefore, their status as oligarchic groups
is becoming tenuous, but they still have their political parties, which hold
about half the seats in parliament and the government, and they control
media, too. Although they are rivals, they still gang up against the
democratic opposition. Moreover, the Surkis-Medvedchuk group is hardly
modernizing, but rather digging into the state administration, notably law
enforcement.

The Ukrainian parliament is a rather curious creation. Virtually all of
Ukraine's businessmen are members of the parliament, which serves as their
meeting place. It is frequently stated that about two-thirds of the
Ukrainian parliamentarians are dollar millionaires, and the Ukrainian
parliament might actually appear more reminiscent of the New York Stock
Exchange than the U.S. Congress. One reason for all these businessmen
sitting in parliament is that parliamentarians enjoy legal immunity, but
their often large corporate interests mean that they are easily subject to
repression from various state inspections of their enterprises. Another
reason for their presence in parliament is that government interference in
business remains excessive.

Ukraine possesses a strong and reasonably well-organized political
opposition. The democratic opposition is mobilized around West-oriented
former Prime Minister Viktor Yushchenko, who leads the center-right bloc Our
Ukraine, which holds just over 100 out of the 450 seats in the parliament.
In addition, the like-minded block of Yuliya Tymoshenko and the Socialist
Party of Olexander Moroz have about 40 more seats. The eight oligarchic
party factions supporting President Leonid Kuchma can barely mobilize a
majority. The communists hold 65 seats, and independents hold the balance.

In the latest parliamentary elections in March 2002, no less than 70 percent
of the votes went to the opposition to Kuchma in the proportional part of
the elections. The oligarchs succeeded in getting almost half the seats
through elections in one-man constituencies, where money plays a greater
role. Surprisingly, the oligarchic parties have legislated a political
reform this year. They have adopted a new electoral law, which makes the
next parliamentary elections in 2006 entirely proportional, which will
presumably undermine the oligarchic representation, while reinforcing the
center-right and communist parties.

Another intended part of the political reform proposed by the oligarchs was
to reduce the power of the President, while enhancing the power of the Prime
Minister and the Parliament. The obvious purpose was to reduce the power of
the President, in case the next president would not be the oligarchs' man.
Their apparent assumption that they might lose the presidential elections
underscores that these elections are a real opportunity for the opposition.

In spite of an alliance with the socialists and the communists, who favor a
parliamentary system out of principle, the oligarchs failed to mobilize the
required two-thirds majority, as Our Ukraine and the Bloc of Yuliya
Tymoshenko opposed the amendment to the Constitution.

President Kuchma persuaded the Constitutional Court to give him the right to
run as a presidential candidate for a third time although the Constitution
allows for only two five-year terms. The excuse was that the Constitution
was adopted in 1996, two years after Mr. Kuchma's first election. Even so,
it appears unlikely that Mr. Kuchma will try to run again, because a solid
majority opposes him. His opinion poll rating does not reach higher than 7
percent.

The Significance of the Ukraine-Russia Economic Relationship
Russia is a natural benchmark for all discussions about Ukraine. The
countries are similar in many ways, both in their history and in their
current development. After communism, both have undergone an oligarchic
phase. In Ukraine it still lasts, while it has ended with the reinforcement
of the state in Russia. Because of earlier reforms, Russia has a stronger
economy.

In the 1990s, the relationship between Russia and Ukraine was dominated by
the gas trade, which consists of Ukraine's importation of natural gas from
Russia and the large Russian transit of natural gas through Ukraine's
pipelines to Europe. Each year, a small number of Russian and Ukrainian gas
traders made a few billion dollars on this trade at the expense of their
governments and populations. After the Ukrainian energy reforms in 2000 and
the change of management of Russia's gas monopoly company Gazprom in 2001,
these malpractices have been brought under control. While the trading
arrangements are still nontransparent, their implications are much less
damaging.

The main features of Ukrainian-Russian economic relations have instead
become trade and investment, while pipelines remain important. With the big
liberalization of the Ukrainian economy, large foreign investment occurred
in Ukraine, primarily from big private Russian business groups. In
particular, four different Russian oil corporations bought four large
Ukrainian oil refineries, and two large aluminum companies were also
purchased. More recently, Russia's two largest mobile phone companies have
bought the two leading mobile phone companies in Ukraine, and two different
Russian groups have been buying up Ukrainian public utilities. By and large,
Russian investment in Ukraine has been economically and socially beneficial.

Because of earlier market reforms in Russia than in Ukraine, the Russian
companies have tended to be more commercially and legally advanced than
their Ukrainian competitors, and they have greatly helped the revival of the
Ukrainian economy. The oil companies are a case in point. They have sharply
raised production at the Ukrainian refineries, developed a network of modern
gas station, and they have driven down gas prices through competition.

The trade relationship between Russia and Ukraine has been troubled.
Ukraine's share of trade with Russia has persistently fallen and has now
reached one quarter of Ukraine's foreign trade. Part of this decline has
been an economically justified adjustment, but part of it has been caused by
mutual protectionism. Formally, Ukraine and Russia are supposed to have
free trade with one another according to an agreement between all twelve
members of the Commonwealth of Independent States from 1993. In reality,
free trade has frequently been violated.

Whenever Ukrainian enterprises were particularly successful in their sales
to Russia of, for instance, steel pipes, vodka or chocolate, Russia raised
severe trade barriers. Ukraine did the same to successful Russian exporters
to Ukraine. The problem with the CIS trade arrangement is that it contains
no arbitration or penalty mechanism, so the agreements are not really
implemented. Rather than trying to solve this problem, Russia has proposed
one new trade arrangement after the other, which have remained little but
formalities. Ukraine has regularly turned these initiatives down.

Last year, however, Russia came up with a new nebulous initiative called a
Common Economic Space, designed for Russia, Ukraine, Kazakhstan and
Belarus. Initially, it is supposed to be a free trade area, and then to
become a customs union, and ultimately even a currency union. The Ukrainian
public and government were divided over this new agreement. The dominant
faction in the government decided to adopt it, and it was recently ratified
by the Ukrainian parliament. The government argued that it was important
for political relations with Moscow, that it would facilitate trade with
Russia, and that it would not harm Ukraine's Western integration.

The opposition and a minority within the government opposed the agreement's
far-reaching plans and feared that it would block Ukraine's integration with
Europe, the WTO and NATO. The immediate effect has been a substantial
increase in Ukrainian exports to Russia by 30 percent last year, as the
Russian and Ukrainian economies are being reintegrated. This is especially
true of the swiftly expanding machinebuilding industry.

To solve their problems with mutual trade, however, both Russia and Ukraine
need to join the World Trade Organization (WTO). The WTO possesses the
necessary trade agreements and an arbitration mechanism, and it can pass
deterring penalties. Both applied for membership in the WTO in 1993, but for
many years neither country pursued WTO membership seriously. Now, both
countries are close to joining. The Common Economic Space idea has been a
serious distraction, but since it does not solve any problems in principle,
both countries have as great a need for WTO membership. If Ukraine would
join the WTO before Russia, it would be able to resolve all its trade
problems with Russia, because Russia would then have to negotiate with
Ukraine to gain WTO membership.

The Outlook for Ukraine after the Presidential Elections

Hardly anybody doubts that the presidential elections on October 31 will
take place and be a watershed in modern Ukrainian history. It is commonly
recognized as the most important political event since Ukraine's national
independence in December 1991. The stakes are high:

• Democracy or authoritarian rule;
• Russian or Western geopolitical orientation;
• Cleaning up of Ukraine's pervasive corruption;

At present, the two dominant candidates are likely. The democratic
center-right candidate will be former Prime Minister Viktor Yushchenko, who
is the Chairman of the Center-right bloc Our Ukraine. He will most likely be
supported by the Bloc of Yuliya Tymoshenko as well. Together these two
political forces represent about one-third of the popular vote. Yushchenko's
main opponent will be Prime Minister Viktor Yanukovich, who is the leading
politician from Donetsk. Yanukovich was recently nominated as the candidate
of all the oligarchic factions, which gathered the support of one-quarter of
the electorate in the last parliamentary elections.

In addition, the communist leader Petro Symonenko is likely to run as
always, with a steady electorate of barely twenty percent. Other candidates
will be minor. The real drama will presumably be a duel between Yushchenko
and Yanukovich. So far, Yushchenko is far ahead in all opinion polls, but
Yanukovich is gradually catching up. In a free and fair election, Yushchenko
is likely to win, but the government is using all means to skew the election
to the advantage of its candidate. The only way in which Yanukovich can win
is by credibly depicting Yushchenko as an extreme Ukrainian nationalist.

In their political activities, the regime-friendly oligarchs are driven by
several concerns. Partly, they are defensive. They are all worried about
losing their booty if a new government comes in, and they fear retribution.
They suspect that they would lose out to big businessmen who are supporting
the opposition, being well aware of how much hardship they have caused their
enemies. Yushchenko has tried to console them with public statements that no
revenge will be taken and that no redistribution of property will ensue.
Partly, they are offensive. Some oligarchs hope to continue benefiting from
state largesse and property, but that does appear less important. In short,
the oligarchs prefer to have a state that serves as their client, and they
have little interest in democracy.

The resources that are being mobilized for the presidential elections are
truly enormous. A common assumption is that the total election funds will
amount to $200-300 million, that is, more than President Bush's current
election campaign, although Ukraine's GDP in current dollar comprises merely
half a percent of the U.S. GDP. This money will largely be put up by big
businessmen in Donetsk and Dnepropetrovsk. In order to deter businessmen
from providing financing to the opposition, the State Tax Inspection and the
state prosecutors often undertake selective actions against such
businessmen.

Two oligarchs control Ukraine's six main television channels, leaving little
media for the opposition or independents. Foreign radio stations - the BBC
World Service, Radio Free Europe/Radio Liberty and Voice of America - still
play a vital role in Ukraine. The best current information is provided by
internet sites, often supported by Western financing. One independent media
outlet after the other has been closed down. Various excuses have been used,
such as licenses, tax violations and excessive libel penalties. The
government's domination over media is tempered by a solid popular distrust
of, and disinterest in, official media. Ukrainians are well aware of their
government trying to manipulate them.

In the parliamentary elections in March 2002, there were many
irregularities, but the ultimate results appear to have been reasonably
representative in most of the country. The big exception was the Donetsk
region, where vote rigging was blatant. The fear is that the "Donetsk model"
will be applied in the whole country this time around. Ukraine has a large
number of regional and local elections, which are spread out over time. The
authorities appear to try to manipulate them ever more, by disqualifying
opposition candidates, prohibiting the public appearance of opposition
candidates, or through fraudulent vote counts. It appears as if they are
intent on systematically denigrating elections so that fraud becomes the
standard by the time of the presidential elections.

The regime is by all kinds of innovative means trying to stop the opposition
from holding meetings. The utilization of public premises is widely blocked,
and even electricity is being turned off. A number of special police forces
are being used for a variety of repressive actions. A few journalists and
politicians die under mysterious circumstances, mostly in traffic accidents
or purported suicides, each year. Although the methods are crude, the
repression is comparatively mild, and it does not deter the opposition or
the population much.

One of the most important factors in the Ukrainian presidential elections is
Russia. In the parliamentary elections in March 2002, President Putin and
his chief of staff engaged personally in publicized meetings with the
leading oligarchic representatives and the communist leader. At present,
official Russian media are overwhelmingly positive on Prime Minister
Yanukovich, the leading oligarchic candidate, and highly critical of
Yushchenko and Our Ukraine. The official Russian position will have
significant influence in Russophile eastern Ukraine. In the last elections,
Russian political advisors played a major role, but to judge from the
election results their utility appears to have been muted. Russia can use
all kinds of means to influence the outcome of the presidential elections.
Given the regression of democracy in Russia, Russia is unfortunately likely
to oppose democracy in Ukraine.

Russian businessmen active in Ukraine will also play a major role in the
elections, but their role is not obvious. In the last elections, they tended
to support individual candidates belonging to different parties, making sure
that they had reliable lobbyists in different factions. This time around,
they are likely to be pressured by the Russian government to support the
oligarchic candidate, but, given the current Russian government campaign
against big businessmen in Russia, their real interest might be to limit the
influence of the Russian state in Ukraine. Therefore, the Russian
businessmen might be the wild card in the forthcoming Ukrainian elections.

Until recently, Russia appeared more democratic than Ukraine, but today
democracy appears to have much better odds in Ukraine than in Russia.
Ukrainian media are far worse than Russian media, and the methods of
repression in Ukraine are somewhat cruder than in Russia. Even so, Ukrainian
society appears more open than Russian society. The fundamental reason is
that Russian power has been consolidated in the centralized law enforcement
apparatus. That is not true of Ukraine. Ukrainian state power is not yet
consolidated in the security police, because President Kuchma has skillfully
played off various groups against one another. The oligarchic groups remain
politically much stronger in Ukraine, and their system is quite competitive.

Another contrast to Russia is that the Ukrainian opposition is strong and
structured. Nor are Ukrainians taken in by government-controlled media.
Furthermore, Ukraine does not suffer from any imperial hangover, and it is
much closer and largely sympathetic to the West. At present, Ukraine may be
described as semi-democratic in the sense that the opposition has a real
chance of winning the presidential elections, but we can harbor no illusion
that the elections will be free and fair. There is a substantial chance that
these elections will mark Ukraine's definite democratic breakthrough. That
is what the U.S. should work for.

Economically, the outlook appears much more obvious. Ukraine is on a great
growth trajectory of about 8 percent a year. Its growth is based on private
ownership, macroeconomic stability, competitive domestic markets and an open
economy. Ukraine is swiftly being integrated into the world economy. Very
serious mistakes have to be made to stop this economic growth, which is
characteristic of the post-Soviet region.

Usually, corruption falls with economic growth, more open government,
increasing foreign trade and democracy. If Ukraine becomes a full-fledged
democracy, corruption is likely to decline faster than if it becomes more
authoritarian, but because of the strong economic growth corruption is
likely to dwindle in any case.

The Current State of U.S.-Ukraine Relations

Beside Russia, the U.S. has persistently been the country that has devoted
the greatest interest to Ukraine. The Unites States is well liked in
Ukraine, and every statement in Washington about Ukraine, such as this
hearing, is carefully scrutinized in Kyiv. For the U.S., a great deal is at
stake. Two aspects of Ukraine's current developments are of fundamental
importance to the United States.

1. Will Ukraine become a democracy or an authoritarian state?
2. Will Ukraine integrate with the West or not?

The U.S. can do a great deal in both regards. Ukraine is tied to democracy
through a large number of international agreements, notably to the United
Nations, the Organization of Security and Cooperation in Europe (OSCE) and
the Council of Europe. Publicly, the Ukrainian government strongly professes
the values of democracy, and it has repeatedly committed itself to such
values in agreements with the U.S. The U.S. can and should insist on the
Ukrainian government honoring all its international commitments with regard
to democracy.

a. Sometimes, U.S. authorities protest when independent media are being
closed down, but it could be done more firmly and at a higher official
level.

b. The Ukrainian government uses the State Tax Inspection as its main agency
of repression. Businessmen who support the opposition have been extensively
investigated and harassed. The U.S. Ambassador to Kyiv, John Herbst, has
rightly protested, but again these abuses should be given more high-level
attention.

c. Both the U.S. and the EU have protested sharply against the aggravated
malpractices in regional and local elections, but again more high-level
attention would be useful.

d. The big test will be the presidential elections on October 31.
International election observers are accepted. The U.S. can do a great deal
to make sure that the actual elections are free and fair.

In the course of this year, little is as important in U.S. policy on Europe
as democracy in Ukraine.

The second aim for U.S. policy on Ukraine is its integration into the West.
Ukraine is already a member of most international organizations, including
the IMF, the World Bank, the OSCE and the Council of Europe. The three
remaining organizations of relevance are the WTO, NATO and the European
Union.

a. For the U.S., the first interest is to have Ukraine accede to the WTO as
soon as possible. Few obstacles remain. The main outstanding U.S. demand is
that Ukraine adopt a new and more stringent law on intellectual property
rights. With little doubt, Ukraine will adopt such a law after the
presidential elections regardless of their outcome. Second, the U.S. should
recognize Ukraine as the market economy it is, which is of importance for
how the U.S. treats Ukraine in anti-dumping disputes. Third, strangely, the
Jackson-Vanik Amendment to the U.S. Trade Law of 1974 about the freedom
of Jews to emigrate from the Soviet Union still applies to Ukraine, although
it is not the Soviet Union and Jews have no complaints about any problems
emigrating from Ukraine. This anachronism should just be abolished.

b. Ukraine has a close cooperation with NATO, which is likely to proceed
further.

In March 2003, the oligarchic majority in the Ukrainian parliament, with
partial support from Our Ukraine, voted for sending some 1,600 Ukrainian
troops to support the U.S. in Iraq. President Kuchma's obvious purpose was
to improve Ukraine's poor relations with the U.S. The troop presence in Iraq
is very unpopular in Ukraine, and several Ukrainian soldiers have died.
Ukrainian troops participate in various peacekeeping efforts in former
Yugoslavia, as well.

c. Since 1996, Ukraine has officially asked for membership in the European
Union, but it has been cold-shouldered by the EU. Yet, the democratic
opposition is much more committed to its "European Choice" than the
government is. Recently, the President of the European Commission, Romano
Prodi, repeated his statement that the EU has no plans for letting Ukraine
become a member of the EU. Although Ukraine is now the neighbor of three
EU countries (Poland, Slovakia and Hungary), it has a minimum of agreements
with the EU.

In particular, its trade access to the EU is very limited, as Ukraine
primarily exports such sensitive goods as steel, foods, chemicals and
textiles. Moreover, the possibilities for Ukrainian citizens to travel west
have been sharply reduced with the enlargement of the EU to countries
that previously did not require visas for Ukrainian citizens. It would be
desirable that the EU open its markets to Ukraine through a free trade
agreement, but a natural EU demand is that Ukraine first become a
member of the WTO.

Regardless of other policies, the U.S. needs to help build up a cadre of
well-educated Ukrainians who understand Western economies and politics.
For this purpose, a larger number of scholarships need to be given for
doctoral degrees at U.S. universities.

Oddly, the U.S. administration has devoted great attention to whether an
unused small pipeline from Odesa in southern Ukraine to Brody in western
Ukraine will be utilized in that direction, or whether it will be turned
around, taking Russian oil from the north to the south instead. Given that
Ukraine has a sound competitive oil market, this does not appear to be a
question of major U.S. interest.

The current dilemma in U.S. policy toward Ukraine may be sharpened as a
choice, on the one hand, between the relative importance of Ukrainian troops
in Iraq, and democracy in Ukraine, on the other. Recently, President George
W. Bush wrote a letter to President Leonid D. Kuchma, thanking him profusely
for sending Ukrainian troops to Iraq. Meanwhile, mid-level State Department
officials are complaining about a variety of abuses of democracy in Ukraine.
No observer can draw any other conclusion than that troops in Iraq
supersedes everything else. This balance in U.S. policy toward Ukraine needs
to be redressed. (END)
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THE ACTION UKRAINE REPORT-04, No. 78: ARTICLE NUMBER THREE
Check Out the News Media for the Latest News >From and About Ukraine
Daily News Gallery: http://www.artukraine.com/newsgallery.htm
=========================================================
3. "UKRAINE'S FUTURE AND UNITED STATES INTERESTS"

Testimony by Nadia M. Diuk, Ph.D.
Director, Central Europe and Eurasia
National Endowment for Democracy (NED)
Committee on International Relations, Subcommittee on Europe
U.S. House Of Representatives, Wash, D.C., Wed, May 12, 2004

Mr. Chairman and Members of the Sub-Committee:

I welcome the opportunity to be here today to comment on the topic of the
hearing "Ukraine's Future and United States Interests." And I would also
like to thank you Mr. Chairman and all of the members of the Committee for
your continuing support for the National Endowment for Democracy over the
years.

I would like to focus on the main event that looms in Ukraine's immediate
future, and which the entire international community will be watching-the
election for the post of President of Ukraine scheduled for October 2004.
Concerns about the conduct of these elections are very well expressed in the
concurrent resolutions recently introduced in the House and Senate under the
title "Urging the Government of Ukraine to Ensure a Democratic, Transparent,
and Fair Election Process for the Presidential Election on October 31,
2004."

The upcoming elections have already determined much of what has happened in
Ukraine over the past year, as the state authorities and the opposition and

pro-democratic forces engage in an ongoing struggle in the political sphere,
media, business and civil society as a whole. The elections are the tip of
an iceberg, which represents a huge systemic problem: Ukraine's ruling
elite is still largely made up of the same people who ran Ukraine under the
Communist system. They were able to transform themselves into the leading
politicians of the newly independent state, and have managed to hang onto
that power until now. Access to the instruments of power has made many of
these people very rich and in some cases crimes both large and small that
would be investigated and prosecuted if rule of law existed, have been
covered up.

Ukraine's record has not been all bad, particularly in the pro-western
foreign policy orientation pursued in the 1990s; in the mid-1990s Ukraine's
media was relatively free if somewhat unsophisticated, and it should be
remembered that Ukraine was the first post-Soviet state where there was a
peaceful transfer of power from one president to another in 1994. But the
major problem today is that this group does not want to give up its control
over government and Ukraine's resources. It does not want to submit to an
open and fair process that would allow the citizens of Ukraine to express
their will as to who should represent them in government.

Distilled down to the basics, the struggle between the ruling elite and its
supporters and those who seek to challenge the old order with a new vision
for Ukraine will be played out in the candidacies of the current Prime
Minister, Viktor Yanukovych, who has been nominated as presidential
candidate by the pro-presidential side and the acclaimed leader of the
opposition, Viktor Yushchenko, leader of a coalition of democratic political
parties "Our Ukraine." There are of course many shades of grey in between
these two positions and there will be other candidates, but according to the
last independent opinion polls, if the presidential election were to have
taken place one month ago, the result in the second round run-off would have
been a Yushchenko victory with 36.4 percent with Yanukovych at 32.8 percent.

Current political developments in Ukraine

Ukraine today is a country whose future is hanging in the balance between
east and west, between democracy and authoritarianism, and where the country
is deeply divided between a political culture which is increasingly
polarized and a civil society that is moving forward and has made
significant advances in the past few years in its level of sophistication
and readiness to act as a counterweight and check on the exercise of
executive power.

It is a society hovering on the edge of a deep crisis, where the next few
months promise to show us a pitched battle between the authorities who are
determined to crush all efforts to have free and fair elections and those
within civil society who share the profound aspiration that Ukraine should
finally join the democratic community of nations, but who are at a huge
disadvantage in terms of resources and support.

This struggle began in earnest at the time of the March 2002 parliamentary
elections, when some 75 percent of Ukraine's electorate voted against the
parties allied with the president. Although, the opposition was
outmaneuvered when it came to the distribution of functions within the
parliament, it was clear that manipulating future elections was not going to
be easy. In the wake of this revelation several initiatives were launched,
emanating mainly from the president's allies in parliament, to explore the
redistribution of executive power.

The main elements of the proposed political reform -or so-called
"politreforma"--were 1) to shift power, particularly authority over the
power-ministries, that is the Ministries of Defense, Interior, Finance and
Industry from the presidency to the Prime Minister and his cabinet, 2) to do
away with direct election of the president and go to a
parliamentary-presidential system where the parliament elects the head of
state, and 3) to change the election of members of parliament to a
completely proportional, party-list system, from the current mixed system.

Such fundamental changes to the distribution of power in Ukraine can be
accomplished only through a change in the constitution, which requires the
agreement of the Constitutional Court, passage through parliament and a
two-thirds majority vote. Several politicians have introduced a number of
different bills over the past six months, which include these and other
changes. Some of these bills have contradicted the Ukrainian Constitution
according to Western experts who have examined them, but the main effect on
the population of Ukraine has been to create a great deal of confusion as
who supports which bill and why, and what the ultimate result of the reform
might be.

The entire debate on changing the constitution and system of government
has been conducted in the absence of objective reporting in much of the
media, which has represented mainly the one-sided arguments of the
government authorities. In fact, public opinion polls show that 18.3
percent of Ukraine's adult population believes that "the topic of reforms
was constantly in the news, but there was absolutely no discussion with
concrete arguments for and against."

A bill that would have eliminated the direct vote for the president met with
a turbulent passage through the parliament, which included tragi-comic
scenes played out in the parliament in December 2003 such as the sabotage
of the automated voting system and many extra-procedural moves by the
parliament's leadership. It was finally defeated on April 8, 2004 by six
votes, when some key pro-presidential supporters failed to show up to
support the bill. In amongst all of the turmoil of the political reform,
President Kuchma has also managed to get the Constitutional Court to
approve his own candidacy for a third term, thus adding another
unpredictable element into the presidential election mix.

A number of other issues should be highlighted as important in the current
political situation.

The media in Ukraine continues to come under pressure to conform to the
message coming from the President's Administration. All three of the
national TV channels-UT-1, Channel One Plus One, and Inter, reflect only the
political line of the President's Administration. Some of the other smaller
stations ICTV, STB, and Novyi Kanal, because they are owned by a more
broadminded segment of the political elite have recently started to
broadcast a somewhat wider range of opinions and political views, while
Channel 5, owned by a supporter of Viktor Yushchenko continues a valiant
struggle to remain on the air even though its broadcasts are not
particularly in support of the opposition but offer an objective perspective
from many points of view.

The truly independent broadcast voices, which provided Ukrainian citizens
with unbiased reporting and balanced debate, have now been silenced: the
Ukrainian service of Radio Liberty, which has for the past decade been
broadcast over AM radio to a growing Ukrainian audience, was taken off the
air, so that the political debates on issues in the run up to the
presidential election will no longer be heard, nor, for that matter, the
excellent Radio Liberty reports on the trial of former Ukrainian Prime
Minister Pavlo Lazarenko for laundering millions of dollars of stolen money
through US bank accounts, which began its deliberations in San Francisco
just at the time when Radio Liberty was pulled off the air. When Tom Dine,
the Director of Radio Liberty came to Kyiv last month, President Kuchma
declined to meet with him. Another major independent broadcaster, who has
suffered much harassment in the past few years, Radio Kontynent, was closed
and its assets seized, with its owner fleeing Ukraine in fear of his life.

There have been attempts to close "Sil's'ki visti," the newspaper of the
Socialist Party, which has generally been in opposition to the president.
And now the flagship of independent Internet publishers, "Ukrains'ka
Pravda," whose founder and editor-in-chief Heorhiy Gongadze, was found
decapitated in November 2001, is once again under pressure from a court
case emanating from the President's Administration. The system of
controlling the media through "temnyky" or theme directives issued from
the President's Administration continues. They are issued daily and explain
to the press how they are to report and spin the news. For the most part,
lately they have instructed that any critical statements coming from the US
State Department, from the EU, or Council of Europe are to be simply
ignored.

Another incident that exemplifies the weird world that Ukraine is becoming,
was the visit of George Soros at the end of March. In addition to having a
major conference derailed by local officials in Crimea and then given
permission from Kyiv to go ahead, he was also pelted in a most undignified
manner, with mayonnaise, flour and glue at a meeting in Kyiv, by thugs
considered by most observers to be in the pay of the authorities.

Intimidation of the opposition continues: One notable incident was the
severe beating of the son of one of Ukraine's foremost independent trade
unionists, Mykhailo Volynets, who is the President of the 124,000-strong
Confederation of Independent Trade Unions of Ukraine, which includes miners,
steelworkers, railroad engineers, metro workers, dock workers and others.
Mr Volynets is also a supporter of Yulia Tymoshenko. This was a change of
tactic, since Volynets himself, a former coalminer, has undergone many
repressions, but an attack against a member of his family was designed
purposely to unnerve and intimidate him.

The most bizarre and troubling events in the current political situation
have occurred around the elections for the mayor of the Western Ukrainian
city of Mukachevo, which took place on April 18, 2004. Independent exit
polling and also according to copies of the protocols which were secured by
observers from the opposition "Our Ukraine" group indicated that the Our
Ukraine candidate Viktor Baloha had won with 57 percent over the candidate
of the presidentially allied SDPUo candidate Ernest Nusser, who received 40
percent. The election commission announced Nusser the official winner.

Even though around fifty parliamentary deputies from the Our Ukraine faction
traveled to Mukachevo to monitor these elections the violations were
outlandish in the extreme: skin-head thugs roughed up a number of the
deputies and smashed up some of the polling stations, legitimate domestic
observers were thrown out of polling stations, individuals working the exit
poll were threatened and harassed, and in the end, the ballot papers were
stolen after the close of voting.

These incidents took place in full view of the international observers
present. This was all in addition to the usual violations which have now
become standard in Ukraine, where the opposition candidate is not allowed
air time or coverage in the press, where his representatives are prevented
from participating in the election commissions even though this is mandated
by law, and where the head of the electoral commission often tries to keep
both the list of voters and the final protocol away from the scrutiny of
independent observers.

The reason for going into all of this detail, and there is much more, is to
demonstrate that the political environment in the run up to the presidential
elections is already prejudicing the vote from being free and fair, and to
show the circumstances in which the election campaign will be conducted.

Assessment of Ukraine's Democratic Credentials

Despite the actions of the government authorities, of all of the post-Soviet
states, (with the exception of the Baltic states and now Georgia) Ukraine is
a country where there are realistic prospects for the development of
democracy: there is a real political struggle, the fledgling institutions of
civil society are evolving and the population constantly expresses its
discontent with the current situation and desire for better and more open
governance. There are numerous institutions of civil society that continue
to operate independently in support of a more open and accountable system
and to promote participation of the citizenry in Ukraine's political and
social life. The U.S policy expressed toward Ukraine last year, specifying
that Ukraine's leadership should be regarded separately from the nation as a
whole, was a good and sound approach that is well-justified by the situation
on the ground.

The Ukrainian parliament, the "Verkhovna Rada," of all of the parliaments in
the region, is unique in being a forum where different points of view are
discussed and real political struggles are fought out. Ukraine's political
parties, while still a long way from being of the Western-type that
represent a particular constituency and set of policies, are distinct and
independent, and some enjoy considerable support among the population.
There are thousands of non-governmental organizations in Ukraine, which
work on a whole variety of social, humanitarian and also political issues.

Ukraine's think tanks and analytical centers are among the most advanced in
the region and have helped to create the backbone of the emerging civil
society. Many of these NGOs worked with great effect during the March 2002
parliamentary elections in getting out the vote, monitoring and observing,
conducting opinion polling and providing voter education and information
where the government controlled media failed.

Ukraine's third sector is largely independent and beyond the control of the
government and its allies. This contrasts positively with Russia, where the
government has exerted great pressure to bring Russia's independent NGOs
under the control of the Kremlin especially through events like the Civic
Forum convened in the fall of 2001.

Ukraine's fledgling civil society and particularly the NGO sector are rising
to the challenge of preparing for the October elections. For example, a
broad group of over 100 non-governmental organizations has come together
under the umbrella of the Civic Coalition "New Choice 2004" with the purpose
of working for free and fair elections, with new member organizations
joining every week. Its members have analyzed the methods used to
manipulate previous elections and for the upcoming elections they will be
working for equal opportunities for all candidates and to ensure that voters
have adequate information to cast an informed vote.

They will monitor the mass media; watch the legislative framework; advise
voters on their rights; provide polling information; publicize the abuse of
administrative resources and campaign finances; and investigate many other
instances where electoral fraud might take place. This is a nation-wide
effort with member organizations operating in over 150 different locations
to date.

The National Endowment for Democracy in Ukraine

The National Endowment for Democracy and its institutes are fully engaged in
working with the pro-democratic forces in Ukraine to strengthen the
institutions that support democracy. In fact, NED support has been going to
Ukraine since 1988, when the community of dissidents and former political
prisoners were preparing the ground work for launching a mass movement for
democracy and independence within what was then the Soviet Union. The
Endowment continues to support a broad range of democracy programs including
youth initiatives, think tanks and programs in support of the free media.

Over the past ten years, the National Democratic Institute and the
International Republican Institute have worked with all of the major
pro-democratic political parties to help them become more professional,
responsive to their constituents and to enable them to consolidate their
political skills. The Center for International Private Enterprise has
worked closely for many years with a community of think tanks and
associations of small and medium entrepreneurs to improve the conditions for
developing a free market economy. The American Center for International
Labor Solidarity, formerly known as the Free Trade Union Institute, has
worked with Ukraine's independent trade unions since the early 1990s.

In its annual review of priorities, the NED and its institutes came to the
conclusion last August, that Ukraine should be a priority for our work this
year, as the place where our concerted efforts could have the greatest
effect in terms of promoting democracy, and where the political situation is
most conducive to our assistance. The presidential elections in Ukraine
were also the subject of a meeting of donors and implementers convened by
the NED in January this year, when we provided a forum for both private and
USG funded organizations to share information, coordinate activities and
determine priorities.

Significance of the Upcoming Presidential Elections

The stakes are high for the upcoming Presidential elections: the outcome
could determine Ukraine's future for many years to come. As well as the
significance for the internal developments in the country, one area where
the election will have a great impact will be in Ukraine's international
relationships, in determining whether Ukraine faces east or west. Unable to
respond to or to accommodate the requirements of the European Union, we see
that President Kuchma has recently been backtracking on the commitment to
pursue European Union membership. On April 20, 2004, the pro-presidential
majority in the Ukrainian parliament ratified agreements on the Single
Economic Space signed by President Kuchma earlier in the year.

This set of agreements initiates the creation of a common tax code and a
customs union ending trade tariffs among the four signatories-Ukraine,
Russia, Belarus and Kazakhstan. Some members of the opposition have gone
as far as condemning this as the attempt to recreate Russian control over
Ukraine. Others have just stated the obvious; this set of alliances is
contradictory and incompatible with Ukraine's declared intention to comply
with requirements to bring it in line with EU membership. President Kuchma
has just recently gone on the record as saying that Ukraine doesn't need to
hurry towards Europe.

This is the just the latest in a series of flip-flops of orientation from
west to east that are characteristic of the Kuchma presidency. Not only do
they sew confusion among Ukraine's Western neighbors and allies, but they
also confirm the impression that Ukraine's foreign policy is not based on a
well thought out and systematic strategy that takes Ukraine's best interests
into account or on the consensus of views of the citizenry, but rather are
the outcome of infighting within a narrow circle of insiders around the
President.

What about accession to NATO? Major public pronouncements on this issue
ceased after the President was snubbed by western leaders at the Prague
summit in November 2002. Despite the existence of a detailed Action Plan
for Ukraine, which clearly outlines steps Ukraine needs to undertake in
terms of strengthening democracy in as far as NATO is a community of nations
based on shared democratic values, the Ukrainian leadership has not done
much to put this plan into action.

While it is true that Ukraine's troops are the fourth largest contingent in
the coalition forces in Iraq at the moment, this decision was also the
result of faction fighting at the top and was never open to public debate.
Ukraine's leadership has benefited from the prestige value of participating
in the coalition because it is helping to erase the memory of all the
unresolved issues that created impediments to smooth US-Ukraine relations
such as the approval to sell Kolchugas, the still unsolved Gongadze murder
and the broken promise not to sell arms to Macedonia during a civil war.

Ukraine's population, however, is in the dark about why Ukrainian troops are
in Iraq. There have been no major speeches from the leadership outlining
Ukraine's purpose or its solidarity with a community of values in support of
the toppling of a dictator and liberating an enslaved Arab nation. A
glimpse of what might lie in the future was revealed in a statement by Prime
Minister Yanukovych, however, when he indicated a few days ago that if
Ukraine is not allowed to participate in the reconstruction of Iraq,
consideration should be given to withdrawing its troops.

Conclusions and Recommendations

Ukraine's leaders need to regain the confidence not only of the
international community but most importantly the confidence of their own
people. In public opinion polls conducted in April 2004, 60.4 percent
stated that they believe Ukraine is moving in the wrong direction, and 70.4
percent believe that there will not be equal opportunities for candidates
campaigning in the election. Only 25.5 percent believe that there is a
truly secret ballot.

Ukraine's elections have become the focus of attention for the United
States, the European Union, Council of Europe as well as international
bodies such as the OSCE-all of which have put forward sound recommendations
that will keep up the pressure on the Ukrainian authorities to ensure that
the upcoming elections are free and fair. These are recommendations that
have appeared elsewhere, but they are worth repeating:

With regard to the media: all candidates should be given access to the
national TV channels and debates should be encouraged and fully covered.
Radio Liberty should be allowed to negotiate contracts for rebroadcast
without its Ukrainian partners suffering intimidation;

With regard to the electoral law: all violations should be swiftly
adjudicated in a fair manner and where guilt is determined, prosecutions
should be seen to ensue. Ukraine has effective legal procedures on paper,
but few are ever carried through to create a better electoral environment.

With regard to the electoral commissions: all efforts should be made to
make sure that the candidates' representatives are able to participate in
the commission, with an equitable distribution of the heads of commissions
according to party affiliation.

With regard to observers and monitors: the work of the OSCE and
international observers should be welcomed and provision made for the
participation of domestic observers. Unfortunately, during the week that
Deputy Secretary Armitage was visiting Ukraine and engaging in discussions
on the importance of the elections, a provision to guarantee the
participation of domestic NGOs as official observers was left out of the
legislation.

The government of Ukraine should pledge to guarantee the physical
safety of observers, poll watchers and officials engaged in ensuring a
free and fair election.

Serious thought should be given to exploring Madelaine Albright's
recommendation in a recent op-ed piece in the "New York Times"
suggesting to Ukraine's leaders that their entry into Western
institutions will slow and that their own bank accounts and visa
privileges will be jeopardized if the elections are fraudulent.

Just a couple of final thoughts:

There has been a lot of discussion and soul searching in Washington and
throughout this country over the past few months about "values," "the values
of democracy" "American values" and the values of simple human decency.
My hope is that while continuing to stress that "the process is important,"
which is always the official US message at the time of an election, we also
expend more effort on all levels with the Ukrainians to emphasize the
importance of values, and to evaluate the main players accordingly.

Those of us who watch Ukraine closely are often told that there are "good"
forces and "bad" forces around President Kuchma and that he is not always
free to act the way he would like to. These protestations are all very well
and good, but it is time for all right thinking citizens of Ukraine to
realize the tremendous responsibility each has for the future of their
country in the next few months. We all wish for the best. (END)
=========================================================
THE ACTION UKRAINE REPORT-04, No. 78: ARTICLE NUMBER FOUR
Major Articles About What is Going on in Ukraine
Current Events Gallery: http://www.artukraine.com/events/index.htm
Become a financial sponsor of The Action Ukraine Program Fund
==========================================================
4. "UKRAINE'S FUTURE AND UNITED STATES INTERESTS"

Written Testimony of Michael Sawkiw, President
Ukrainian Congress Committee of America (UCCA)
Committee on International Relations, Subcommittee on Europe
U.S. House Of Representatives, Wash, D.C., Wed, May 12, 2004

Mr. Chairman and members of the House of Representatives Committee on
International Relations, thank you for the opportunity to comment on issues
regarding U.S. policy toward Ukraine.

The Ukrainian Congress Committee of America (UCCA), as a representative
organization of Americans of Ukrainian descent, would like to address our
community's concerns on issues regarding U.S. foreign policy towards
Ukraine, in particular during this highly visible period prior to Ukraine's
presidential elections on October 31, 2004. The Ukrainian community in the
United States expresses its gratitude to the House International Relations
Committee for your continuous leadership and support of democratic and
economic reforms in Ukraine. Since 1996, the United States and Ukraine have
formed a unique relationship defined as a strategic partnership between two
countries.

U.S. Global Leadership

The United States of America, as the leader of the democratic world, plays a
prominent role in promoting democracy around the globe. Such an important
role requires even greater emphasis following the tragic events of September
11, 2001, as our ultimate goal in the war against international terrorism is
the establishment of free and open societies, which guarantee human and
civic rights to all citizens. Prior to the United States' current focus on
the Middle East and Central Asia, we were actively involved in the
democratization process in Central and East Europe.

Due to such activity and U.S. assistance and leadership, many of the Central
and East European nations have achieved great success in establishing strong
democratic governments that rely on market economies. The recent European
Union (EU) and NATO enlargement, which admitted several new states from
the former Communist bloc, serves as a positive example of the successes
achieved in that area. Unfortunately, not all of the Central and East
European countries have managed to progress so quickly.

The objectives of peace, stability, and democracy in Central and East Europe
are enhanced only because the United States remains committed and engaged
in a strategic partnership with Ukraine. Should Congress stay the course,
investing in a strong and democratic Ukraine, the goal of stability in a
turbulent region will be within reach. In the 21st century, the United
States will have no better ally in Central Europe than Ukraine, and our
engagement invested in Ukraine shall achieve historic gains. In the words
of The Wall Street Journal: "The U.S. and its allies have much to gain by
nudging Ukraine, one of Europe's largest countries, toward economic
viability. For one thing, it could resist revanchist tendencies among those
Russians who would like to restore the Russian empire."

Political Situation in Ukraine

Ukraine, as one of the largest and most populous European countries that
emerged as an independent state following the fall of the Soviet Union in
1991, has been marred by many problems, including an economic crisis and
high-level corruption. Nevertheless, substantial progress was achieved in
many areas including the closure of the Chornobyl nuclear power facility;
voluntarily dismantling the world's third largest nuclear arsenal; the
emergence of an active civil society; freedom of religion; support for
national minorities; freedom of movement; and, freedom of expression.

In the subsequent decade of its renewed independence, Ukraine faced many
challenges including an economic crisis and corruption. Nevertheless, it
has been able to recover from the initial depression and currently advances
rather steadily in its goal of European and Euro-Atlantic integration. The
Ukrainian economy continues to grow, the government has implemented
significant changes in legislation to improve cooperation with the West,
while the investment climate continues to improve and other changes are
being made to transform Ukraine into a Western-like democracy. Increased
economic stability in Ukraine serves as a basis for the improvement of its
democratic governance system. However, there remain issues that Ukraine
continues to combat.

With the advent of a new generation of leaders, issue in the aforementioned
will continue to alleviate itself. If recent events in Ukraine are
indicative of what lays ahead, the October 31, 2004 elections for president
may determine whether Ukraine becomes a Western-style democracy respectful
of its citizens' rights and allied with the West, or a former Soviet
republic re-absorbed into an authoritarian 'sphere of influence' by
Ukraine's neighbor Russia. Thus, the strategic and economic dividends from
continued U.S. engagement with Ukraine can be virtually limitless. In fact,
Ukraine's strategic partnership with the United States represents the key to
Ukraine's continued economic and political reform.

It is impossible to assert that problems do not exist in Ukraine. Yet, the
former Warsaw Pact country of Poland and newly independent state of Georgia
view Western engagement with Ukraine, in particular engagement from the
United States, as essential to the goal of stability within the region. As
one of Europe's largest countries, continued support from the United States
would instill sustained political and economic viability in Ukraine, thus
eliminating revanchist tendencies in neighboring Russia to restore its lost
empire.

As recently as several weeks ago, Jackson Diehl from The Washington Post
wrote: "As giant Ukraine goes, so, likely will slip most of the other
former Soviet states that now live uneasily between the expanding European
Union and Russia.Putin and the former-KGB circle around him would like to
fold them all into a new bloc dominated by Moscow and able to bargain as a
quasi-equal with the EU and NATO. That's why it's not surprising that
Putin's allies in Ukraine are on the offensive, employing the same tactics
here [in Ukraine].that succeeded in eliminating the democratic opposition in
Moscow - like the shutdown of independent media and prosecution of
businessmen who finance non-government parties."

Civil Society in Ukraine

With engagement from the United States and other Western countries, Ukraine
has been very successful in developing a civil society, which as a result
has become increasingly vocal, active and influential in the development of
democratic institutions and behavior. Having been involved in Ukraine's
political life as a civic educator since the early days of independence, the
Ukrainian Congress Committee of America (UCCA) has established close
contacts with a wide network of non-governmental organizations (NGO's)
throughout Ukraine. Our organization has successfully implemented multiple
comprehensive civic education programs geared toward voter education and
awareness that emphasize citizen's rights and responsibilities.

Throughout the years of our involvement, the UCCA ensured that every project
implemented transfers Western experience and skills to Ukrainian NGO's. We
develop our programs to assist in the building of civic organizations that
are self-sufficient, active, and as a result become an integral sector of
the developing political process. Similar approaches have been implemented
by various organizations that are involved in the democracy building process
in Ukraine. It has proven to be a great success and as a result Ukrainian
NGO's continue to improve the quality of their work and advocacy.

Nevertheless, Ukrainian NGO's are faced with an insurmountable problem of
establishing a network through which to receive financial support from
various groups whose interests they represent. Although small- and
medium-sized business is developing, Ukraine's economic arena is still
dominated by big business oligarchs. At this critical juncture in the
history of Ukraine's new democracy, a failure to support the rights of the
Ukrainian electorate to an informed choice in the upcoming presidential
election will have profound repercussions not only in Ukraine, but also in
the currently transforming face of Europe.

The success of Ukraine as a dependable partner for the United States will
largely depend on the election of a new president, freely chosen by its 50
million citizens, and not by the dictates of a few. The United States and
other members of the international democratic community need to remain
involved in pre-election programs and provide the Ukrainian NGO community
with effective financial assistance that will allow them to become
self-sufficient.

Presidential Elections in Ukraine

Presently, Ukraine is at a crossroads. The results of the October
presidential elections will decide whether it will irreversibly commit
itself to democratic reforms and European integration, or become an
authoritarian state, in which the rule of law is compromised to the
advantage of those in power. A free, fair and transparent election this
year is the only guarantee to further democratic development.

Recently, the government of Ukraine proposed changes to the constitution
that would establish a parliamentary republic rather than the current
presidential-parliamentary republic. Moreover, the Supreme Court of Ukraine
declared that President Kuchma was eligible to run for a third term despite
the Constitution's two-term limit, citing that he was elected prior to the
adoption of the Constitution in 1996. Such attempts at Constitutional
reform have caused a strong reaction from the international community, not
to mention from the democratic/opposition forces within Ukraine.

On April 19, 2004, the mayoral election in Mukachevo, Transcarpathian region
of Ukraine, was marred by bold and open violations of election laws in
Ukraine. Open interference with the voting process, voter intimidation,
threats and physical violence against observers, attacks on Members of
Ukrainian Parliament, and inaction by Ukraine's law enforcement structures
indicate the necessity for increased monitoring of electoral procedures
during the campaign process. Many political analysts regard this mayoral
election as a strategic move to sway the Ukrainian electorate who otherwise
may be ambivalent toward the election process and stem their belief in the
importance of their individual role in the political process developing in
their state.

Therefore, international demands for an investigation of the violations and
punishment of its perpetrators is an extremely important example of
demonstrating that the citizens of Ukraine and the international community
will not allow such violations during the presidential elections in October.
Bowing to the domestic and international outcry, President Kuchma ordered an
investigation of the events in Mukachevo, but it remains to be seen what
results it will bring. The commission's findings are to be completed by May
13, 2004.

The Ukrainian American community praises the past efforts and commitment of
the United States Congress to ensure that Ukraine develops into a truly
democratic state with a free-market economy. H.Con.Res.415 expresses a
sense of Congress regarding the upcoming presidential elections in Ukraine,
yet limits its strategic focus towards Ukraine. In the last thirteen years
of Ukraine's regained independence, with the help of the United States
Congress, the nation of Ukraine has successfully avoided inter-ethnic
conflicts, overcome a massive economic crisis, and most importantly has
begun to regained confidence in themselves as an essential element of their
state's political process.

Following her trip to Ukraine in February 2004, former Secretary of State
Madeleine Albright penned a New York Times op-ed article clearly
articulating the role of the United States towards Ukraine. She writes:
"So what should the United States do to encourage democracy in Ukraine?
First speak out.President Bush and cabinet officials need to insist on free
and fair elections and they need to do it soon.Senior officials should visit
Ukraine, and other opportunities will come this June when leaders of the
Group of 8 industrialized nations, the European Union, and NATO meet.

Saving democracy in Ukraine belongs on that agenda." It is the consensus
of the Ukrainian American community that the United States not suspend its
assistance at this most critical juncture for Ukraine, but rather continue
its engagement and support until Ukraine secures its ever-growing democracy.

Freedom of Speech

Recently, the media in Ukraine has criticized the government's infringement
on the freedom of speech, as witnessed by the closure of two radio stations
that re-transmitted foreign programming of such internationally recognized
independent newscasters as Radio Free Europe/Radio Liberty (RFE/RL),
Deutsche Welle, BBC, the Voice of America (VOA), Polish Radio, etc. The
U.S. Department of State's Country Report on Human Rights Practices for
Ukraine in 2003 sites issues whereby "authorities interfered with the news
media by harassing and intimidating journalists, censoring material, and
pressuring them into applying self-censorship." Likewise, many journalists

have voiced their concern of the so-called "temnyky," a list of instructions
distributed to media outlets recommending them on how to cover certain
sensitive issues and what to include and not include in their news coverage.

Many of the independent media outlets that reported on corruption and abuses
of power by government officials or oligarchs have been intimidated by the
State Tax administration or other government agencies resulting in endless
audits, seizing equipment, imposing fines, and the like. It is necessary to
say, however, that after a boisterous outcry by independent journalists in
Ukraine and the subsequent reprimand of the Ukrainian government's actions
by the international community, President Kuchma ordered all investigations
and audits against the media cease.

Although such procedures disrupted news coverage, the president's decision
provides a legal basis for maintaining the freedom of speech - a fundamental
right upheld by the Constitution of Ukraine. Access to free and independent
media channels by the presidential candidates in Ukraine is essential for a
transparent electoral process. As noted by various think-tank organizations
in the United States and worldwide, the need for increased support for the
news media in Ukraine remains paramount to attain equal access for all
candidates, as well as to institute confidence in the electorate's decision.

"I think that the overwhelming concern of the international community and
certainly of the United States," stated Deputy Secretary of State Armitage
at a press conference in Kyiv, Ukraine in March 2004, "at this stage in
Ukraine's development, that Ukraine is seen as a country mature enough to
go forward and hold free, fair, and democratic elections."

Ukraine is an important strategic partner of the United States. An ally in
the war against international terrorism, it was one of the first states to
open its airspace to U.S. air forces during the war against al Quaeda in
Afghanistan. Ukraine also joined the coalition of democratic forces to
re-establish peace and security in Iraq by providing the forth-largest
peacekeeping contingent as well as a nuclear, biological, and chemical (NBC)
battalion during the war in Iraq. A stable and democratic Ukraine is
essential for the development of Central and East Europe, especially in the
context of the current European Union and NATO expansion.

Thus, as the world leader and champion of democracy, it is critical that the
United States remains involved in the democratic development in Ukraine and
helps ensure that the pre-election period is not marred with violations and
that the elections in Ukraine are conducted in a free, fair, and transparent
manner.

Recommendations:

Members of the Subcommittee, Ukraine is at a crossroads. Ensuring free and
fair presidential elections in Ukraine is paramount to further democratic
development, as the October 31, 2004 race will determine Ukraine future
course. The Ukrainian Congress Committee of America humbly suggests the
following priorities for U.S. foreign policy toward Ukraine:

§ Continued support for the development of democracy, in particular,
non-governmental organizations (NGO's)

The NGO community is becoming an increasingly important sector in Ukraine's
political/democratic development. NGO's are becoming more vocal in
expressing the opinion of the electorate, more effective in disseminating
non-partisan information among the citizens, and more successful in
educating the public to not only cast their ballot, but also to understand
their inalienable rights as citizens of a democratic country.

The Ukrainian Congress Committee of America has been involved in every
election campaign in Ukraine since 1994, and as a result, has developed
extensive contacts throughout the NGO community in Ukraine. The UCCA's
projects have always been based on the belief that democracy embraces the
right of the people to freely determine their destiny and must be supported
by the notion of civic education. By transferring western principles deemed
critical to democratic development, the UCCA programs are developed to
ensure sustainability and cooperation among Ukrainian NGO's even in the
inter-election periods - an integral part democratic development.

Therefore, U.S. assistance must be extended to the NGO community prior to
and following the presidential elections to ensure that the civic community
in strengthened and the democratic process continues. Such assistance
should also be extended to the independent news media outlets in Ukraine in
an effort to allow for an equal playing field for all presidential
candidates.

§ An official delegation of election observers

Providing assistance to ensure free and fair election on the day of the vote
is also essential. It is important for the Ukrainian people to see that
foreign governments, in particular the United States, not only provide
declaratory statements encouraging free and fair elections, but actively
participate in the elections as observers. An official U.S. delegation of
International Election Observers will serve that purpose and facilitate a
better relationship between the United States and Ukraine. We respectfully
urge you to recommend such action to your colleagues and organize an
official delegation of International Election Observers for October 31,
2004, as well as during the campaign period itself.

Conclusion

Ukraine has reached a decisive stage in its transitional development. The
international community, interested in ensuring peace and furthering the
tenets of democracy in the region, has provided significant assistance in
helping Ukraine overcome its Soviet legacy and integrate into European and
Euro-Atlantic structures; however, we urge the members of the House
International Relations Committee to continue their involvement in Ukraine
prior to and following the October 31, 2004 elections.

United Press International (UPI) correspondent Robin Shepherd eloquently
suggested in an analysis of Ukraine on May 11, 2004: "What Ukraine needs
from the wider world is a healthy dose of the carrot and stick formula which
worked so well for the eight former communist countries which joined the
European Union on May 1. A clear signal from Brussels [one may also add
here Washington, op. cit.] that Ukraine would be welcomed in as soon as it
meets the standards expected of a member of the European Union could work
wonders in mobilizing and enthusing the democratic opposition."

Indeed, issues currently discussed within U.S. government circles such as
Permanent Normal Trade Relations (PNTR); non-market economy (NME) status;
Ukraine's accession to the World Trade Organization (WTO), as well as a
myriad of other concerns could be catalysts for true democratic reform in
Ukraine.

On behalf of the Ukrainian Congress Committee of America, representing the
concerns of the Ukrainian American community, we seek your guidance and
thank you for your continuous support of democratic reforms in Ukraine. We
express our sincerest hope that the United States remains a strategic
partner of a democratic Ukraine, as an equal among its European neighbors.
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